Telstra keen to keep its darling status

Telstra chairman Catherine Livingstone affirms the company’s 28¢ payout for fiscal 2013 but adds that there will be a change to the dividend policy from 2014.

John McDuling

Chief executive David Thodey reaffirmed the company’s guidance for low single-digit growth in earnings and revenues and for free cashflows of between $4.75 billion and $5.25 billion.
Photo: Louise Kennerley

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Telstra chairman Catherine Livingstone has signalled the board’s ­priority is to increase the 28¢-a-share dividend despite the threat to lucrative national broadband ­network payments from a potential change in ­government.

After months of speculation about share buybacks and acquisitions, Ms Livingstone confirmed the company wanted to direct its large flows of excess cash to shareholders.

“Our framework principle is that the dividend remain fully-franked, and we seek to increase it over time.” she said at the company’s annual ­general meeting in Melbourne.

Describing the NBN as “business as usual for Telstra,” Ms Livingstone promised to protect shareholders’ interests in any negotiations after the next election with the Coalition, which has said it wants to scale back the huge project.

“What we are confident about is that we have definitive agreements in place and they would form the basis of any change in government policy,” she said. “The overriding principle we employed when we negotiated them was the preservation of shareholder value. That is the way we would approach any change in government policy.”

At last year’s historic annual meeting, where shareholders voted for ­critical NBN agreements, Telstra pledged to pay its 28¢ dividend for the next two years to soothe investor uncertainty. That decision underpinned a 27 per cent rise in the share price over the past year, helped by sharp falls in global interest rates which made Telstra shares more attractive. The stock currently yields 7.1 per cent.

Ms Livingstone confirmed Telstra will pay its 28¢ dividend, which it has maintained since 2006, in 2012-13. She revealed that next financial year the board would return to a previous policy of reviewing the size of dividends every six months.

Under existing agreements, which were finalised in March, Telstra will be paid billions of dollars over the next decade to lease its ducts, tunnels and exchanges to NBN Co and gradually switch off its copper network.

In June 2010, the value of the agreements to Telstra was estimated at $11 billion in post-tax, net present value terms, comprised of $9 billion in disconnection and lease payments and $2 billion in extra incentives from the government.

More than two years later, Ms Livingstone said $11 billion was “no longer a relevant benchmark” for the value of the deal, indicating potential upside to the company.